December 12, 2016

Town revitalization

I’ve been thinking how economically disadvantaged cities and small communities can revitalize their towns. This begs the question — what makes a good town?

Do good schools make a good town, or is it backwards — does a good town make good schools? Do good jobs make a good town, or does a good town make good jobs?

Historically, good towns have sprung up around two forces: natural transportation interfaces and global export capacity. Natural transportation interfaces are ways to ship things by boat — Ports and rivers. Global export capacity is just that — making a product that can be sold globally ( computer software, oil, etc… ).

So, imagine that you’re a suburb or small town someplace, whose chief export is your people. Your town used to make something sold wide and far — but that product’s factory closed or moved away. Now, the town has surplus productive population for the local demand pool. What use is a town full of genius-level people that don’t have a way to package their genius into products that can be shipped anyplace?

And, I do believe that most people are Genius level. To prove it: https://en.wikipedia.org/wiki/Flynn_effect — Average IQ ( that is mean IQ ) has increased 60 points since 1930. The average IQ, using today’s scale, of people in 1930 would be 70. The same scale would have “normal” people today at 130. 70 was considered “mentally retarded”, and 130 is considered borderline genius! How did the average change so much? The answer is that society asked more of people, and so they rose to the occasion. This creates a catch-22: if you don’t ask more of people, they don’t improve. But, if you ask too much — test too often/finely, then they fail to improve.

So, to revitalize a failing town, you need to create a seed where people can ask more of themselves, but on their own. Here’s my hypothesis for a recipe how that a government can implement:

Establish a business incubator near, but not in, the Makerspace. Incubators are essentially tables, meeting spaces, nap spaces, coffee, Internet, entertainment, and art. You should be able to get a quick nap at one. You should be able to work securely at one, without fear that your laptop will get stolen. You should be able to feel inspired. It has to be quiet — no loud machines. Think Starbucks — but you don’t feel bad if you’re there all day. Subsidize coffee, drinks, and meals. Allow businesses to carve out private spaces of the public space ( with rent payments, of course ). Allow individuals to work there, with token payments to keep out the homeless/shiftless.

Establish a few different grant types. Grant type 1 — the “search” grant. This is to an individual, about $20k. People apply to the grant, and show effort. Success is not the way to award the grant — effort is — find metrics that are hard to game, that show effort. A good example is a letter of reference from someone respected in the community. You’ll need to give away about 10-20 of these grants a year. A second type of grant is a seed grant. 40-60k, given for traction. That is, either sales/sales growth, or user growth. You’ll need to give away 3 of these a year.

Market the heck out of all three. Have schools do field trips to the makerspace. Have meetups hosted in the incubator, for free. Give away pamphlets about the grant program. You’ll need to get about 400 people into the grant pipeline every year, award search grants to 10-20 of them a year, and award traction grants to 3.

This is all super cheap for a community, esp one that has building around and some tax base left. We’re talking 100K for the makerspace up front, with maybe 60K/yr in operatiing expense. The incubator is likely even less. The grants are the most expensive thing, and we’re talking 400K in “search” grants, and 200k in traction grants. The grants should be secured grants — secured by equity/equity options.

If you do this — less than a million dollars a year — over 5 years, you’ll develop new businesses and change the dynamic of your town. This process is the seed around which small businesses will form. Some of those will grow, perhaps quite large. It’s the formula VC’s use, but are not fully cognizant of. If your town has been in decline for a long time, then you may need to start without the grants. Those grants keep people afloat while they start a business — without them, you’ll get higher drop-out rates — but you’ll eventually find success. And success means job growth!